But the Fed warned of “significant downside risks to the economic outlook, including strains in global financial markets” -- a clear reference to the European debt crisis.

Bernanke said it was “a bit frustrating” waiting on the sidelines for European leaders to address their problems. “Unfortunately we can’t disassociate ourselves from Europe. The things that happen there do affect us,” he said.

Bernanke said the situation there adds to a string of negative events, particularly the Japanese earthquake and tsunami, that have hampered the U.S. recovery.

“There has been a certain amount of bad luck and I think the volatility in financial markets associated with the European situation has been a drag on the recovery,” Bernanke said. “It’s part of the reason why the second half of 2011 was less strong.”

The continued volatility has dampened the confidence of U.S. consumers, and Bernanke advised people to continue to try to make good financial decisions until the economy is stronger.

“My best advice to Americans is to continue to live your lives and continue to think about your personal situation and continue to make smart decisions based on your own financial situation,” he said.